Mish's Global Economic Trend Analysis |
| MBS Clobbered and Treasury Yields Soar Following Purportedly Good Job Numbers Posted: 05 Jul 2013 12:26 PM PDT Curve Watchers Anonymous notes that treasury yields surged higher and mortgage backed securities (MBS) had a steep selloff following purportedly good job numbers. Beneath the surface, the economy actually shed 326,000 full-time jobs. In the short-term what matters is the reaction, so let's take a look at how treasury yields reacted to the news. $TNX: 10-Year Treasury Yield  Yield on the 10-year treasury note is up 21.8 basis points to 2.719%. The yield is up 110 basis points (1.1 percentage points) since the May low of 1.614%. $TYX: 30-Year Treasury Yield  Yield on the 30-year long bond is up 18.2 basis points on the day to 3.679%. The yield is up 86.9 basis points since the May low of 2.81%. $FVX: 5-Year Treasury Yield  Yield on the 5-year treasury note is up 18.6 basis points on the day to 1.86%. The yield is up 95.7 basis points since the May low of .641%. Historical Perspective  click on chart for sharper image Charts were captured at slightly different times (minutes apart) so yields on two sets of charts do not match precisely. Legend
Yields have generally been rising since mid-2012 and have blasted higher since May-2013. A 1.1 percentage point rise on treasures will have a significant impact on housing. Mortgage Backed Securities Clobbered Michael Becker at WCS Funding Group says today is one of the worst selloffs in mortgage backed securities (MBS) that he has ever seen. For example a 30-year FHA loan that Becker placed on Tuesday at 4 1/8% would be 4 3/4% today. The Fed is probably having a conniption-fit over these reactions. Expect the Fed to come out in full-force again, with repeated attempts to talk rates down. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
| Posted: 05 Jul 2013 09:27 AM PDT Initial Reaction The establishment survey showed a gain of 195,000 and that is a very respectable number. However, the household survey shows a more modest gain of 160,000 jobs. The civilian labor force rose by 177,000 thus the unemployment rate was steady at 7.6%. Digging beneath the surface, the numbers do not look so good. 326,000 Full-Time Jobs Lost Involuntary part-time jobs increased by 322,000 while voluntary part-time jobs increased by another 110,000. Thus, of the 160,000 household survey gain, 486,000 of them were part-time jobs, a loss of 326,000 full-time jobs. This caused a spike of 0.5 percentage points in U6 (alternative unemployment) to 14.3%. The Participation Rate rose 0.1 to 63.5%, 0.2 higher than the low of 63.3% dating back to 1979. Obamacare Effect Last month there was no jump in part-time employment which had me wondering if the the bulk of the Obamacare effect (employers reducing hours from 32 to 25 and hiring hundreds of thousands of new employees to make up the hours) had mostly played out. This month, the trend of huge part-time employment resumed, and in a major way. June BLS Jobs Statistics at a Glance
Quick Notes About the Unemployment Rate
June 2013 Jobs Report Please consider the Bureau of Labor Statistics (BLS) June 2013 Employment Report. Total nonfarm payroll employment increased by 195,000 in June, and the unemployment rate was unchanged at 7.6 percent, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality, professional and business services, retail trade, health care, and financial activities. Click on Any Chart in this Report to See a Sharper Image Unemployment Rate - Seasonally Adjusted  Month to Month Changes  click on chart for sharper image Hours and Wages Private average weekly hours of production and non-supervisory workers were flat at 33.7 hours. Average weekly hours of all employees was flat at 34.5 hours. Average hourly earnings of all private workers rose $0.10 to $24.01. Average hourly earnings of private-sector production and non-supervisory employees was up $0.05 to $20.14. Real wages have been declining. Add in increases in state taxes and the average Joe has been hammered pretty badly. For 2013, one needs to factor in the increase in payroll taxes for Social Security. For further discussion of income distribution, please see What's "Really" Behind Gross Inequalities In Income Distribution? BLS Birth-Death Model Black Box The BLS Birth/Death Model is an estimation by the BLS as to how many jobs the economy created that were not picked up in the payroll survey. The Birth-Death numbers are not seasonally adjusted, while the reported headline number is. In the black box the BLS combines the two, coming up with a total. The Birth Death number influences the overall totals, but the math is not as simple as it appears. Moreover, the effect is nowhere near as big as it might logically appear at first glance. Do not add or subtract the Birth-Death numbers from the reported headline totals. It does not work that way. Birth/Death assumptions are supposedly made according to estimates of where the BLS thinks we are in the economic cycle. Theory is one thing. Practice is clearly another as noted by numerous recent revisions. Birth Death Model Adjustments For 2012  Birth Death Model Adjustments For 2013  Birth-Death Notes Once again: Do NOT subtract the Birth-Death number from the reported headline number. That approach is statistically invalid. In general, analysts attribute much more to birth-death numbers than they should. Except at economic turns, BLS Birth/Death errors are reasonably small. For a discussion of how little birth-death numbers affect actual monthly reporting, please see BLS Birth/Death Model Yet Again. Table 15 BLS Alternate Measures of Unemployment  click on chart for sharper image Table A-15 is where one can find a better approximation of what the unemployment rate really is. Notice I said "better" approximation not to be confused with "good" approximation. The official unemployment rate is 7.6%. However, if you start counting all the people who want a job but gave up, all the people with part-time jobs that want a full-time job, all the people who dropped off the unemployment rolls because their unemployment benefits ran out, etc., you get a closer picture of what the unemployment rate is. That number is in the last row labeled U-6. U-6 is much higher at 14.3%. Both numbers would be way higher still, were it not for millions dropping out of the labor force over the past few years. Labor Force Factors
Were it not for people dropping out of the labor force, the unemployment rate would be over 10%. In addition, there are 8,226,000 people who are working part-time but want full-time work. Grossly Distorted Statistics Digging under the surface, much of the drop in the unemployment rate over the past two years is nothing but a statistical mirage coupled with a massive increase in part-time jobs starting in October 2012 as a result of Obamacare legislation. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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